My concern is that my ion system is not as smooth in the XBMC gui as my Core2Duo desktop machine is. Also thanks to Netflix using Silverlight (no GPU acceleration) the ion fails to play Netflix HD. I am not overly concerned with the cost of the processor, but with the power load. The PSU I have is only 120W. The gt520 is rated for a TDP 29W with an idle of ~10W. Can I run an i5 setup without drawing too much power? Will an i3 perform fine for the GUI and Netflix HD?

Well, dunno much about power consumption but 120W may be pushing it. But I can definitely tell you that the Intel 13 2100 S.Bridge works well in my rig streaming all content online to include HULU..Netflix ..ect..ect!! All themes within XBMC that i have tried work just as snappy as ever. The i5 may be a bit of overkill if ur just HTPC'n, you may want to save money wherever you can..

Sounds like you may be looking to build within group 5-6 parameters so Check this out: